With no shortage of improvements needed in its field, the Governmental Accounting Standards Board has taken on an array of complex projects that should result in a series of important documents over the next six months."This is proving to be a rather ambitious agenda, and it's quite a busy time here at the GASB," said Chairman Robert H. Attmore. "We are cranking out documents and expect to have a busy period from now through the middle of 2007."
Ultimately, the most important project on GASB's workbench is its conceptual framework, a long-term effort to establish the philosophical underpinnings of governmental accounting. An exposure draft issued in August proposed definitions of seven fundamental elements of financial reports. The board is taking an approach that defines each element by its inherent characteristics, rather than deriving definitions from a primary element. The comment period ends on Nov. 17, 2006.
At the end of September, GASB issued Statement 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, which had been issued as an exposure draft a year earlier. The standard establishes what constitutes a sale and what is, in effect, a collateralized borrowing.
Reacting to public comments in its redeliberations, the board had decided not to require retroactive application of the entire standard. Rather, in consideration of governments that have securitized their settlements with tobacco companies, the board decided that sales of future revenues that would not meet the requirements of current recognition criteria, and thus would be considered deferred items, be amortized prospectively.
By the end of October, the board expected to issue an invitation to comment on fund balance reporting and governmental fund-type definitions. The document will present alternative definitions of fund types and display options. After receiving comments, the board will issue an exposure draft in mid-2007, and possibly a final statement in early 2008.
The board expects to issue an exposure draft on intangible assets by the end of 2006, with a final statement possible by the middle of 2007.
Attmore said that the proposal should appeal to certain critics. "People usually accuse us of only identifying unrecorded liabilities, such as post-employment benefits and pollution remediation obligations," he said. "In this case, based on our research, we know that governments have substantial intangible assets that have not been reported."
Those assets often include such things as software developed in-house, rights of way, water rights and development rights. The new reporting model established in Statement 34 required intangible assets to be reported, but the board has yet to define them.
Derivatives, and more
The board is also mulling the comments received on a preliminary views document on accounting for derivatives. The suggested treatment would put all derivatives in the balance sheet at fair value, and fair value changes would be reported as gains and losses in income, except for hedging gains and losses, which would be reported on the balance sheet as deferrals. The board aims to issue a proposed statement in the first quarter of 2007, and a final statement by the end of that year.
The board has just added to its agenda a short-term project on pension disclosures. The objective is a standard that brings note disclosures up to the quality of disclosures required in the standard on other post-employment benefits. An exposure draft may be issued by the end of the year, with a final statement possible by May of 2007.
At the same time, the board will be researching the state of governmental pension fund reporting, looking into the effectiveness of current standards, the quality of standards in other sectors, and legislative changes that are affecting pensions.
"We want to sort myth from fact and get a good sense of whether the existing standards are doing what they were expected to do," Attmore said.
Another project is looking into public-private partnerships that are being created to finance infrastructure projects, such as highways being leased to private companies. Accounting for these partnerships is, in Attmore's word, "unsettled" in both the public and private arenas, as well as internationally.
The board is considering working jointly with the International Public Sector Accounting Standards Board, perhaps to develop similar standards.
